A new report out of the Far East alleges that Apple has agreed to absorb increased costs for upstream Japanese components in order to prevent shipping delays of the iPad 2.

Sources from upstream component makers told Taiwanese industry publication DigiTimes on Thursday that Apple had agreed to the arrangement.

According to the report, Apple will absorb all the additional costs arising from Japan-based component makers affected by a massive earthquake earlier this month, in exchange for "smooth shipments." As such, Apple's upstream component suppliers are expected to see minimal negative affects to profitability, sources said.

"However, for other tablet PC vendors, purchasing pressure will increase and if they are unable to absorb the extra costs, which will only give Apple more advantages in the market," the report noted.

Sources also claimed that monthly shipments of the iPad 2 will reach four million units in the second quarter. According to the report, upstream suppliers of anisotropic conductive films (ACF) and ITO materials have enough inventory to last until May, but may face shortages in June.

The DigiTimes report may be related to an earlier report that suggested Apple was "considering accepting price hikes" in order to secure sufficient supply of touch panels. It has been suggested that Apple makes use of 60 percent of the global supply chain touch panel capacity.

Analysts have differed over the immediate impact of the Japan quake and subsequent tsunami to Apple's supply chain. An early report by iSuppli disclosed five important components sourced from Japan for the iPad 2, including NAND flash, DRAM, an electric compass, touch screen overlay glass and the battery, "likely to be impacted" by logistical issues as a result of the disaster.

However, Gene Munster of Piper Jaffray voiced his opinion that any impact to iPad 2 supply would be "modest."

Earlier this week, The Wall Street Journal reported that Apple had contacted a Japanese supplier expressing concerns over a potential shortage of lithium ion batteries used in the company's iPods.

Apple's healthy cash reserves give it a clear advantage over its competitors. CEO Steve Jobs has said that the company's more than $50 billion in cash is reserved for "one or more strategic opportunities in the future."

In January, Apple COO Tim Cook revealed that the company had committed $3.9 billion to long term component supply contracts over the next two years. Analysts

This shows how apple actually cares about their customers. They will pay more money to get the iPad 2 components, and sell them at the same price as they sell them now, meaning they will end up making less profit per unit. I'd love to see how many other companies like Dell and up which r trashing apple lately would do the same. I think instead they would slow down their sales just to maximize their profit per unit... Apple rocks once again..

This shows how apple actually cares about their customers. They will pay more money to get the iPad 2 components, and sell them at the same price as they sell them now, meaning they will end up making less profit per unit. I'd love to see how many other companies like Dell and up which r trashing apple lately would do the same. I think instead they would slow down their sales just to maximize their profit per unit... Apple rocks once again..

What this shows is Apple doesn't want to give any competitor any opportunity to catch up. The appearance of caring is a nice benefit, but it wasn't part of the decision tree.

Remind me again why they built a nuclear reactor right next to the sea? The contamination has spread into the sea water. Bye bye food chain. Sushi might be off the menu for a while.

Because a malfunctioning nuclear reactor that has no ready access to a large body of water for emergency cooling would probably fail catastrophically, releasing HUGE amount of radioactive material into the air. Fukushima disaster is pretty bad right now, but had they not had sea water to cool the reactors, it would probably be 10 times worse.

What good did the last 55 billion of the 60 billion do them in this case? What did they do here that couldn't have been done with 5 billion in the bank instead of 60? Nada!

Regardless of the what. A strong cash position pleases stock markets no end.

And others are going on about it hurting Apple in the long-term if they absorb the cost, I don't see how it is going to hurt Apple MORE than a manufacturer that has ZERO room for manouver on pricing because there is next to no profit in their segment of the market.

The fact that Apple can easily afford to take these kind of economic changes with little to no effect is definitely a good thing.

Seems more likely that the cheap-ass hardware manufacterers are more likely to go under in these situations as they'll either have to put prices up or sell at a loss.

What good did the last 55 billion of the 60 billion do them in this case? What did they do here that couldn't have been done with 5 billion in the bank instead of 60? Nada!

Remember Tim Cook mentioning that they were about to invest $3.9B in locking up critical supplies? If they only had $5B in the bank, such a move would have been more difficult because it would leave you vulnerable and unable to take advantage of other opportunities. With $55B in the bank, interest from investment alone is likely sufficient to finance such a strategy.

Supply chain strategies can be devastating for competition. Not only are you guaranteeing continuous supply of your products, you are locking up manufacturing capacities such that competitors are stifled. Why do you think not a single competitor can beat Apple on tablet pricing, when Apple is historically the most expensive computer brand?

Their first big deal in putting a lock on the supply chain was in flash memory for the iPods. Possibly, this was one factor enabling them to monopolize the MP3 market in the early days when flash was becoming the key component in music players. Now, they have identified other components (touchscreens, for example) as being critical, not just for them but also for others.

Supply chain strategies are also expensive and risky, because there is a possibility you are either unnecessarily hedging or hedging on the wrong components. You cannot spend 50-60% of your cash hedging on one component. So, having $50B allows them the luxury of doing this without risking a fraction of their cash.

And, of course, the $3.9B Cook talked about likely has nothing to do with the premium they're allegedly paying now to mitigate the supply chain problems in Japan. So, imagine if they had *only* $5B, they too would be feeling the pain.

Because a malfunctioning nuclear reactor that has no ready access to a large body of water for emergency cooling would probably fail catastrophically, releasing HUGE amount of radioactive material into the air. Fukushima disaster is pretty bad right now, but had they not had sea water to cool the reactors, it would probably be 10 times worse.

I respectfully disagree. Sea water is not the right water for cooling a reactor. They have only been using it because they had no choice. It was never planned to be an emergency cooling solution because they believed the plant design had sufficient redundancy. First, they had diesel generators to back up the main power for the fresh water pumps. Second, they had batteries backing up the diesel. But they did not expect a tsunami large enough to rise above the protective walls. The diesel generators were literally drowned. The batteries were designed to last a few hours because they figured that any problem affecting the diesels could be fixed in that amount of time.

Regardless of the what. A strong cash position pleases stock markets no end.

That's not true. There is an end to how it pleases the market. Stock investors value dividends. It's a continuum, not an on/off switch, but past a certain point, additional cash is undervalued by the stock market.

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And others are going on about it hurting Apple in the long-term if they absorb the cost, I don't see how it is going to hurt Apple MORE than a manufacturer that has ZERO room for manouver on pricing because there is next to no profit in their segment of the market.

Definitely true. I'm assuming that Apple agreed to this not out of the kindness of their hearts, but with an explicit assurance that these manufacturers owe Apple a big one. But Apple having a lot of cash has nothing to do with this deal. Apple makes profits on the hardware it sells. It does not need to pull money out of a cash pile to pay slightly higher prices for components. 2,000,000 iPads sell for about $1.2 billion. That revenue can be immediately used to buy sufficient components to buy ALL the parts for *4* million iPads. Whew! The cash pile is safe for another rainy day.

Remember Tim Cook mentioning that they were about to invest $3.9B in locking up critical supplies? If they only had $5B in the bank, such a move would have been more difficult because it would leave you vulnerable and unable to take advantage of other opportunities. With $55B in the bank, interest from investment alone is likely sufficient to finance such a strategy.

Apple spins off more cash than that in one quarter. You do realize that if 5 billion is good, 55 billion is NOT 11 times as good, right?

So maybe they stop at 10 billion? 15? 20? 30? 45? NEVER? They should NEVER give the cash back to its rightful owners, the owners of the company?

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Supply chain strategies can be devastating for competition. Not only are you guaranteeing continuous supply of your products, you are locking up manufacturing capacities such that competitors are stifled. Why do you think not a single competitor can beat Apple on tablet pricing, when Apple is historically the most expensive computer brand?

Oh I know I know! Because Apple has 60 billion in the bank? Thank god they didn't only have $20 billion, then they could have NEVER afforded to lock up the worldwide supply of touch panels. With 60 billion they can lock up the worldwide supply for 20 years! And they SHOULD! Riiiight.

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Supply chain strategies are also expensive and risky, because there is a possibility you are either unnecessarily hedging or hedging on the wrong components. You cannot spend 50-60% of your cash hedging on one component. So, having $50B allows them the luxury of doing this without risking a fraction of their cash.

That 3.9 billion wasn't cash though, it was a committment to buy. Apple didn't use any of its existing cash pile to buy those parts, it used cash from operations. So, sorry, your argument falls flat.

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And, of course, the $3.9B Cook talked about likely has nothing to do with the premium they're allegedly paying now to mitigate the supply chain problems in Japan. So, imagine if they had *only* $5B, they too would be feeling the pain.

Nuclear reactors are built next to the sea because they need cooling. Sea water is a cheap and effective way to cool the reactors.

At least all that radiation will be nicely diluted it if gets into the sea.

This discussion takes me back 30 years, to my university days, it saddens me that we have wasted so much time.
But on the bright side I think that renewables and conservation have finally come of age, and I hope all the FUD and paid trolls wont stop it this time.

I respectfully disagree. Sea water is not the right water for cooling a reactor. They have only been using it because they had no choice. It was never planned to be an emergency cooling solution because they believed the plant design had sufficient redundancy. First, they had diesel generators to back up the main power for the fresh water pumps. Second, they had batteries backing up the diesel. But they did not expect a tsunami large enough to rise above the protective walls. The diesel generators were literally drowned. The batteries were designed to last a few hours because they figured that any problem affecting the diesels could be fixed in that amount of time.

Possibly, access to sea water helped. But it was not planned.

Exactly, the use of seawater was actually delayed by management bc seawater ruins the reactors. Also, the backup diesel gens. were put in the basement as a precaution against typhoons only to be flooded by the tsunami.

Such an outdated term. Why not just say "Taiwan" or "Digitimes" even. AI readers would know what you mean. Fewer words and you don't sound like you're quoting from a novel written during the era of colonialism.

Edit: bah, why do I even bother to complain? I thought I'd seen this phrase before so I searched for that exact above phrase at site:AI and Google shows many pages of articles by Katie, Josh, Slash, Sam (I stopped looking there) all using this. Would someone please forward my comment to the editor? Ahem, there is an editor, right?

Because a malfunctioning nuclear reactor that has no ready access to a large body of water for emergency cooling would probably fail catastrophically, releasing HUGE amount of radioactive material into the air. Fukushima disaster is pretty bad right now, but had they not had sea water to cool the reactors, it would probably be 10 times worse.

sorry butt thats bull
Japan built 6 reactors on the cheap.. decades ago
and did no improvements or real upgrades in all that time.
japan could right now pour tons of concrete in them and seal them and end this disaster now.

Exactly, the use of seawater was actually delayed by management bc seawater ruins the reactors. Also, the backup diesel gens. were put in the basement as a precaution against typhoons only to be flooded by the tsunami.

Regardless of the what. A strong cash position pleases stock markets no end.

It pleases the stock markets not at all. No metric of stock performance is based on or includes cash. Or debt, for that matter. Cash reserves are utterly meaningless numbers to stockholders unless the company pays some of it out as dividends. In fact a company holding huge cash reserves without any obvious or even theoretical plans for spending it on growth raises all sorts of questions.

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Originally Posted by brucep

aapl stock price is partly based on all that debt free cash .

'Fraid not. Nobody buys a stock for a company's cash, unless they are planning on taking over the company.

Mr. Stelligent is right. Stockholders do not own the cash. Of course, being right does not entitle one to be condescending. He could have explained this to you more nicely.

Who owns the cash? The company. So you might think, as a shareholder, I own a piece of the company and therefore a share of the assets. Seems reasonable, right? But not legally true.

In general, common stock holders do not have own the assets of a company. Why? The fact is that they don't even truly own the company. When you purchase stocks, the only thing you own is the shares. In a legal sense, no one truly owns a corporation. The directors decide how to run the company. Shareholders can indirectly influence this by voting for or against directors, not to mention for or against specific motions. But they do not directly make decisions about how a company is run, including how assets are divided.

For example, the board can decide to *spend* the cash on a frivolous purchase. If the shareholders agreement allow them to do this, there is nothing you can do. So, clearly, you as the shareholder do not own the cash.

Even if a company shuts down due to bankruptcy, common shareholders are often last in line to benefit from the assets.

I have described this as simply as possible without resorting to legalese. Hope it helps.

So I am afraid Mr. Stelligent is right. Still, no need to be arrogant just because one knows more.

In general, common stock holders do not have own the assets of a company. Why? The fact is that they don't even truly own the company. When you purchase stocks, the only thing you own is the shares. In a legal sense, no one truly owns a corporation. The directors decide how to run the company. Shareholders can indirectly influence this by voting for or against directors, not to mention for or against specific motions. But they do not directly make decisions about how a company is run, including how assets are divided.

Jesus. I understand that I do not technically, legally, own the cash, in the way that I could go in and claim it or sue for it or any of that. I have an economics degree from an Ivy league school for christ's sake. But to suggest that the money isn't the shareholder's is ridiculous. And to suggest that 60 billion in cash somehow helped Apple sign a contract to buy $4 billion in parts that they will resell for $8 billion is even more ridiculous.

If $60 billion is good, then when Apple has $80 billion in the bank in 2 years that will be much better, right? And $100 billion, even better! It should never be given back to the shareholders, because Apple knows what to do with that cash (sit it in a bank earning nearly nothing) WAY better than any little private individual does, right?

Jesus. I understand that I do not technically, legally, own the cash, in the way that I could go in and claim it or sue for it or any of that. I have an economics degree from an Ivy league school for christ's sake. But to suggest that the money isn't the shareholder's is ridiculous. And to suggest that 60 billion in cash somehow helped Apple sign a contract to buy $4 billion in parts that they will resell for $8 billion is even more ridiculous.

If $60 billion is good, then when Apple has $80 billion in the bank in 2 years that will be much better, right? And $100 billion, even better! It should never be given back to the shareholders, because Apple knows what to do with that cash (sit it in a bank earning nearly nothing) WAY better than any little private individual does, right?

Sorry, but I am confused. If you understand you don't own the cash, why is it ridiculous to suggest the money is not yours?

Perhaps you can explain why you think the cash is yours when it is not legally yours and you will never be able to use it, touch it, decide how it is spent, etc.

Please explain. Thank you.

BTW, "your" cash is not sitting in the bank doing nothing. A significant % is tied up in short term investments. If you dig thru their balance sheets, you will see they don't do too badly investing.